Why UK businesses are investing for growth

In brief: UK business lending and investment activity are showing signs of recovery. Lower borrowing costs (with average new corporate debt costs now around 5.42%), available credit and comparatively resilient balance sheets are helping some companies fund investment in digital transformation, infrastructure, expansion and acquisitions. However, businesses remain selective, with decisions continuing to depend on their financial position, sector and growth plans.

Key Takeaways:

• Business borrowing is increasing: Lending to large companies and SMEs has grown, suggesting demand for finance is strengthening after a more subdued period.
• Investment is driving activity: Businesses are increasingly using capital to support technology, infrastructure, international expansion and strategic acquisitions.
• Borrowing conditions have improved: New corporate borrowing costs have fallen from recent highs, while many CFOs continue to view credit as readily available.
• Corporate debt and net debt-to-earnings ratios are below historic benchmarks, which may give some businesses capacity to invest.
• Growth decisions remain selective: Economic uncertainty persists, so companies are focusing on investments that support productivity, competitiveness and long-term strategic goals.

What is driving renewed business investment in the UK?

After several years of subdued activity, corporate borrowing appears to be gathering momentum. Lending to large companies rose 9.4% year-on-year in July 2026¹, while underlying large-company loan balances increased by around £40 billion over the previous 12 months². SME lending has also remained positive, growing 4.1% year-on-year³. Together, these trends point to growing borrowing activity across the market after several years of more subdued demand.

What's particularly noteworthy is not simply the pace of lending growth, but that it appears to be driven by a desire to invest for the future rather than manage short-term pressures, as seen during previous cycles.

As a result, the current cycle looks less like a return to excessive borrowing and more like a shift from preserving financial resilience towards deploying capital to drive growth, productivity and competitiveness.

One reason this trend may have further room to run is that UK corporates are entering the cycle from a relatively healthy starting position. According to Bank for International Settlements and Bank of England data, non-financial corporate debt currently sits at around 59% of GDP⁴, approximately 30 percentage points below levels seen during the global financial crisis.

Corporate net debt-to-earnings ratios also remain below long-term averages, standing at around 1.5x compared with a post-2000 average of approximately 1.7x⁵. This suggests many businesses retain significant capacity to borrow while maintaining prudent balance sheets.

Are borrowing conditions improving for UK businesses?

The improving economics of borrowing are also contributing to increased activity. The cost of new corporate borrowing has fallen materially from the highs reached during the interest rate tightening cycle, with average new debt costs now around 5.42%. Bank competition remains strong, helping drive tighter lending spreads and ensuring credit remains readily available to many businesses.

Recent Deloitte CFO research found that 64% of respondents believe credit is readily available, 44% see bank borrowing as attractive and 38% expect their borrowing requirements to increase⁶. At the same time, only 17% believe it is an appropriate moment to take significantly greater balance-sheet risk. These data suggest that businesses appear increasingly willing to borrow, but they are doing so selectively and for strategic reasons rather than pursuing risk for its own sake.

Which sectors are driving demand for business borrowing?

Borrowing is increasing across a broad range of sectors, suggesting businesses are investing across the economy rather than responding to isolated sector-specific pressures.

Business investment data supports this view. UK business investment grew by 4.3% during 2025 and continued to expand during the first half of 2026, driven by spending on infrastructure, buildings, utilities and transport projects.

Digital transformation is also becoming an increasingly important driver of demand. Deloitte data reveals 93% of CFOs expect digital investment to increase over the next 12 months⁷, as businesses invest in software, cloud infrastructure and AI-related technologies to improve productivity, strengthen capabilities and remain competitive.

Another notable development is the increasing role of mergers and acquisitions as a driver of lending demand. Completed transaction volumes remain below historic highs, but there are signs of growing momentum. The value of outbound acquisitions completed by UK companies increased from £3 billion in Q4 2025 to £4.7 billion in Q1 2026, despite fewer overall transactions. This suggests business are pursuing larger, more strategic opportunities.

HSBC UK is also seeing growing levels of early-stage acquisition activity within its own client base, particularly among organisations seeking exposure to new markets, faster-growing economies and complementary capabilities. Combined with continued investment in infrastructure and technology, this points to a broader increase in growth-focused activity.

How can a corporate banking partner like HSBC support business growth?

As businesses increasingly focus on growth, they are looking for more from their banking relationships. At HSBC UK, that means helping clients identify opportunities, navigate challenges and make informed financing decisions, drawing on local market insight, sector expertise and international connectivity.

While economic uncertainty remains part of the backdrop, the latest lending and investment trends suggest a growing number of UK businesses are looking beyond resilience and focusing on expansion. As borrowing, investment and acquisition activity continue to gather momentum, the question for many organisations is no longer whether to invest, but where capital can have the greatest impact.

If you are looking for a corporate banking partner to support your growth ambitions, visit our corporate financing page: